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Mr. Speaker, Mr. Vice President, Members of the 95th Congress, and distinguished
guests:

In accordance with the Constitution, I come before you once again to
report on the state of the Union.

This report will be my last--maybe--[laughter]--but for the Union it
is only the first of such reports in our third century of independence,
the close of which none of us will ever see. We can be confident, however,
that 100 years from now a freely elected President will come before a freely
elected Congress chosen to renew our great Republic's pledge to the Government
of the people, by the people, and for the people.

For my part I pray the third century we are beginning will bring to
all Americans, our children and their children's children, a greater measure
of individual equality, opportunity, and justice, a greater abundance of
spiritual and material blessings, and a higher quality of life, liberty,
and the pursuit of happiness.

The state of the Union is a measurement of the many elements of which
it is composed--a political union of diverse States, an economic union
of varying interests, an intellectual union of common convictions, and
a moral union of immutable ideals.

Taken in sum, I can report that the state of the Union is good. There
is room for improvement, as always, but today we have a more perfect Union
than when my stewardship began.

As a people we discovered that our Bicentennial was much more than a
celebration of the past; it became a joyous reaffirmation of all that it
means to be Americans, a confirmation before all the world of the vitality
and durability of our free institutions. I am proud to have been privileged
to preside over the affairs of our Federal Government during these eventful
years when we proved, as I said in my first words upon assuming office,
that "our Constitution works; our great Republic is a Government of laws
and not of men. Here the people rule."

The people have spoken; they have chosen a new President and a new Congress
to work their will. I congratulate you--particularly the new Members--as
sincerely as I did President-elect Carter. In a few days it will be his
duty to outline for you his priorities and legislative recommendations.
Tonight I will not infringe on that responsibility, but rather wish him
the very best in all that is good for our country.

During the period of my own service in this Capitol and in the White
House, I can recall many orderly transitions of governmental responsibility--of
problems as well as of position, of burdens as well as of power. The genius
of the American system is that we do this so naturally and so normally.
There are no soldiers marching in the street except in the Inaugural Parade;
no public demonstrations except for some of the dancers at the Inaugural
Ball; the opposition party doesn't go underground, but goes on functioning
vigorously in the Congress and in the country; and our vigilant press goes
right on probing and publishing our faults and our follies, confirming
the wisdom of the framers of the first amendment.

Because of the transfer of authority in our form of government affects
the state of the Union and of the world, I am happy to report to you that
the current transition is proceeding very well. I was determined that it
should; I wanted the new President to get off on an easier start than I
had.

When I became President on August 9, 1974, our Nation was deeply divided
and tormented. In rapid succession the Vice President and the President
had resigned in disgrace. We were still struggling with the after-effects
of a long, unpopular, and bloody war in Southeast Asia. The economy was
unstable and racing toward the worst recession in 40 years. People were
losing jobs. The cost of living was soaring. The Congress and the Chief
Executive were at loggerheads. The integrity of our constitutional process
and other institutions was being questioned. For more than 15 years domestic
spending had soared as Federal programs multiplied, and the expense escalated
annually. During the same period our national security needs were steadily
shortchanged. In the grave situation which prevailed in August 1974, our
will to maintain our international leadership was in doubt.

I asked for your prayers and went to work.

In January 1975 I reported to the Congress that the state of the Union
was not good. I proposed urgent action to improve the economy and to achieve
energy independence in 10 years. I reassured America's allies and sought
to reduce the danger of confrontation with potential adversaries. I pledged
a new direction for America. 1975 was a year of difficult decisions, but
Americans responded with realism, common sense, and self-discipline.

By January 1976 we were headed in a new direction, which I hold to be
the right direction for a free society. It was guided by the belief that
successful problemsolving requires more than Federal action alone, that
it involves a full partnership among all branches and all levels of government
and public policies which nurture and promote the creative energies of
private enterprises, institutions, and individual citizens.

A year ago I reported that the state of the Union was better--in many
ways a lot better--but still not good enough. Common sense told me to stick
to the steady course we were on, to continue to restrain the inflationary
growth of government, to reduce taxes as well as spending, to return local
decisions to local officials, to provide for long-range sufficiency in
energy and national security needs. I resisted the immense pressures of
an election year to open the floodgates of Federal money and the temptation
to promise more than I could deliver. I told it as it was to the American
people and demonstrated to the world that in our spirited political competition,
as in this chamber, Americans can disagree without being disagreeable.

Now, after 30 months as your President, I can say that while we still
have a way to go, I am proud of the long way we have come together.

I am proud of the part I have had in rebuilding confidence in the Presidency,
confidence in our free system, and confidence in our future. Once again,
Americans believe in themselves, in their leaders, and in the promise that
tomorrow holds for their children.

I am proud that today America is at peace. None of our sons are fighting
and dying in battle anywhere in the world. And the chance for peace among
all nations is improved by our determination to honor our vital commitments
in defense of peace and freedom.

I am proud that the United States has strong defenses, strong alliances,
and a sound and courageous foreign policy.

Our alliances with major partners, the great industrial democracies
of Western Europe, Japan, and Canada, have never been more solid. Consultations
on mutual security, defense, and East-West relations have grown closer.
Collaboration has branched out into new fields such as energy, economic
policy, and relations with the Third World. We have used many avenues for
cooperation, including summit meetings held among major allied countries.
The friendship of the democracies is deeper, warmer, and more effective
than at any time in 30 years.

We are maintaining stability in the strategic nuclear balance and pushing
back the specter of nuclear war. A decisive step forward was taken in the
Vladivostok Accord which I negotiated with General Secretary Brezhnev--joint
recognition that an equal ceiling should be placed on the number of strategic
weapons on each side. With resolve and wisdom on the part of both nations,
a good agreement is well within reach this year.

The framework for peace in the Middle East has been built. Hopes for
future progress in the Middle East were stirred by the historic agreements
we reached and the trust and confidence that we formed. Thanks to American
leadership, the prospects for peace in the Middle East are brighter than
they have been in three decades. The Arab states and Israel continue to
look to us to lead them from confrontation and war to a new era of accommodation
and peace. We have no alternative but to persevere, and I am sure we will.
The opportunities for a final settlement are great, and the price of failure
is a return to the bloodshed and hatred that for too long have brought
tragedy to all of the peoples of this area and repeatedly edged the world
to the brink of war.

Our relationship with the People's Republic of China is proving its
importance and its durability. We are finding more and more common ground
between our two countries on basic questions of international affairs.

In my two trips to Asia as President, we have reaffirmed America's continuing
vital interest in the peace and security of Asia and the Pacific Basin,
established a new partnership with Japan, confirmed our dedication to the
security of Korea, and reinforced our ties with the free nations of Southeast
Asia.

An historic dialog has begun between industrial nations and developing
nations. Most proposals on the table are the initiatives of the United
States, including those on food, energy, technology, trade, investment,
and commodities. We are well launched on this process of shaping positive
and reliable economic relations between rich nations and poor nations over
the long term.

We have made progress in trade negotiations and avoided protectionism
during recession. We strengthened the international monetary system. During
the past 2 years the free world's most important economic powers have already
brought about important changes that serve both developed and developing
economies. The momentum already achieved must be nurtured and strengthened,
for the prosperity of the rich and poor depends upon it.

In Latin America, our relations have taken on a new maturity and a sense
of common enterprise.

In Africa the quest for peace, racial justice, and economic progress
is at a crucial point. The United States, in close cooperation with the
United Kingdom, is actively engaged in this historic process. Will change
come about by warfare and chaos and foreign intervention? Or will it come
about by negotiated and fair solutions, ensuring majority rule, minority
rights, and economic advance? America is committed to the side of peace
and justice and to the principle that Africa should shape its own future,
free of outside intervention.

American leadership has helped to stimulate new international efforts
to stem the proliferation of nuclear weapons and to shape a comprehensive
treaty governing the use of oceans.

I am gratified by these accomplishments. They constitute a record of
broad success for America and for the peace and prosperity of all mankind.
This administration leaves to its successor a world in better condition
than we found. We leave, as well, a solid foundation for progress on a
range of issues that are vital to the well-being of America.

What has been achieved in the field of foreign affairs and what can
be accomplished by the new administration demonstrate the genius of Americans
working together for the common good. It is this, our remarkable ability
to work together, that has made us a unique nation. It is Congress, the
President, and the people striving for a better world.

I know all patriotic Americans want this Nation's foreign policy to
succeed. I urge members of my party in this Congress to give the new President
loyal support in this area. I express the hope that this new Congress will
reexamine its constitutional role in international affairs.

The exclusive right to declare war, the duty to advise and consent on
the part of the Senate, the power of the purse on the part of the House
are ample authority for the legislative branch and should be jealously
guarded. But because we may have been too careless of these powers in the
past does not justify congressional intrusion into, or obstruction of,
the proper exercise of Presidential responsibilities now or in the future.
There can be only one Commander in Chief. In these times crises cannot
be managed and wars cannot be waged by committee, nor can peace be pursued
solely by parliamentary debate. To the ears of the world, the President
speaks for the Nation. While he is, of course, ultimately accountable to
the Congress, the courts, and the people, he and his emissaries must not
be handicapped in advance in their relations with foreign governments as
has sometimes happened in the past.

At home I am encouraged by the Nation's recovery from the recession
and our steady return to sound economic growth. It is now continuing after
the recent period of uncertainty, which is part of the price we pay for
free elections.

Our most pressing need today and the future is more jobs-- productive,
permanent jobs created by a thriving economy. We must revise our tax system
both to ease the burden of heavy taxation and to encourage the investment
necessary for the creation of productive jobs for all Americans who want
to work.

Earlier this month I proposed a permanent income tax reduction of $10
billion below current levels, including raising the personal exemption
from $750 to $1,000. I also recommended a series of measures to stimulate
investment, such as accelerated depreciation for new plants and equipment
in areas of high unemployment, a reduction in the corporate tax rate from
48 to 46 percent, and eliminating the present double taxation of dividends.
I strongly urge the Congress to pass these measures to help create the
productive, permanent jobs in the private economy that are so essential
for our future.

All the basic trends are good; we are not on the brink of another recession
or economic disaster. If we follow prudent policies that encourage productive
investment and discourage destructive inflation, we will come out on top,
and I am sure we will.

We have successfully cut inflation by more than half. When I took office,
the Consumer Price Index was rising at 12.2 percent a year. During 1976
the rate of inflation was 5 percent.

We have created more jobs--over 4 million more jobs today than in the
spring of 1975. Throughout this Nation today we have over 88 million people
in useful, productive jobs--more than at any other time in our Nation's
history. But there are still too many Americans unemployed. This is the
greatest regret that I have as I leave office.

We brought about with the Congress, after much delay, the renewal of
the general revenue sharing. We expanded community development and Federal
manpower programs. We began a significant urban mass transit program. Federal
programs today provide more funds for our States and local governments
than ever before--$70 billion for the current fiscal year. Through these
programs and others that provide aid directly to individuals, we have kept
faith with our tradition of compassionate help for those who need it. As
we begin our third century we can be proud of the progress that we have
made in meeting human needs for all of our citizens.

We have cut the growth of crime by nearly 90 percent. Two years ago
crime was increasing at the rate of 18 percent annually. In the first three
quarters of 1976, that growth rate had been cut to 2 percent. But crime,
and the fear of crime, remains one of the most serious problems facing
our citizens.

We have had some successes, and there have been some disappointments.
Bluntly, I must remind you that we have not made satisfactory progress
toward achieving energy independence. Energy is absolutely vital to the
defense of our country, to the strength of our economy, and to the quality
of our lives.

Two years ago I proposed to the Congress the first comprehensive national
energy program--a specific and coordinated set of measures that would end
our vulnerability to embargo, blockade, or arbitrary price increases and
would mobilize U.S. technology and resources to supply a significant share
of the free world's energy after 1985. Of the major energy proposals I
submitted 2 years ago, only half, belatedly, became law. In 1973 we were
dependent upon foreign oil imports for 36 percent of our needs. Today,
we are 40-percent dependent, and we'll pay out $34 billion for foreign
oil this year. Such vulnerability at present or in the future is intolerable
and must be ended.

The answer to where we stand on our national energy effort today reminds
me of the old argument about whether the tank is half full or half empty.
The pessimist will say we have half failed to achieve our 10-year energy
goals; the optimist will say that we have half succeeded. I am always an
optimist, but we must make up for lost time.

We have laid a solid foundation for completing the enormous task which
confronts us. I have signed into law five major energy bills which contain
significant measures for conservation, resource development, stockpiling,
and standby authorities. We have moved forward to develop the naval petroleum
reserves; to build a 500-million barrel strategic petroleum stockpile;
to phase out unnecessary Government allocation and price controls; to develop
a lasting relationship with other oil consuming nations; to improve the
efficiency of energy use through conservation in automobiles, buildings,
and industry; and to expand research on new technology and renewable resources
such as wind power, geothermal and solar energy. All these actions, significant
as they are for the long term, are only the beginning.

I recently submitted to the Congress my proposals to reorganize the
Federal energy structure and the hard choices which remain if we are serious
about reducing our dependence upon foreign energy. These include programs
to reverse our declining production of natural gas and increase incentives
for domestic crude oil production. I proposed to minimize environmental
uncertainties affecting coal development, expand nuclear power generation,
and create an energy independence authority to provide government financial
assistance for vital energy programs where private capital is not available.

We must explore every reasonable prospect for meeting our energy needs
when our current domestic reserves of oil and natural gas begin to dwindle
in the next decade. I urgently ask Congress and the new administration
to move quickly on these issues. This Nation has the resources and the
capability to achieve our energy goals if its Government has the will to
proceed, and I think we do.

I have been disappointed by inability to complete many of the meaningful
organizational reforms which I contemplated for the Federal Government,
although a start has been made. For example, the Federal judicial system
has long served as a model for other courts. But today it is threatened
by a shortage of qualified Federal judges and an explosion of litigation
claiming Federal jurisdiction. I commend to the new administration and
the Congress the recent report and recommendations of the Department of
Justice, undertaken at my request, on "the needs of the Federal Courts."
I especially endorse its proposals for a new commission on the judicial
appointment process.

While the judicial branch of our Government may require reinforcement,
the budgets and payrolls of the other branches remain staggering. I cannot
help but observe that while the White House staff and the Executive Office
of the President have been reduced and the total number of civilians in
the executive branch contained during the 1970's, the legislative branch
has increased substantially although the membership of the Congress remains
at 535. Congress now costs the taxpayers more than a million dollars per
Member; the whole legislative budget has passed the billion dollar mark.

I set out to reduce the growth in the size and spending of the Federal
Government, but no President can accomplish this alone. The Congress sidetracked
most of my requests for authority to consolidate overlapping programs and
agencies, to return more decisionmaking and responsibility to State and
local governments through block grants instead of rigid categorical programs,
and to eliminate unnecessary redtape and outrageously complex regulations.

We have made some progress in cutting back the expansion of government
and its intrusion into individual lives, but believe me, there is much
more to be done--and you and I know it. It can only be done by tough and
temporarily painful surgery by a Congress as prepared as the President
to face up to this very real political problem. Again, I wish my successor,
working with a substantial majority of his own party, the best of success
in reforming the costly and cumbersome machinery of the Federal Government.

The task of self-government is never finished. The problems are great;
the opportunities are greater.

America's first goal is and always will be peace with honor. America
must remain first in keeping peace in the world. We can remain first in
peace only if we are never second in defense.

In presenting the state of the Union to the Congress and to the American
people, I have a special obligation as Commander in Chief to report on
our national defense. Our survival as a free and independent people requires,
above all, strong military forces that are well equipped and highly trained
to perform their assigned mission.

I am particularly gratified to report that over the past 2 1/2 years,
we have been able to reverse the dangerous decline of the previous decade
in real resources this country was devoting to national defense. This was
an immediate problem I faced in 1974. The evidence was unmistakable that
the Soviet Union had been steadily increasing the resources it applied
to building its military strength. During this same period the United States
real defense spending declined. In my three budgets we not only arrested
that dangerous decline, but we have established the positive trend which
is essential to our ability to contribute to peace and stability in the
world.

The Vietnam war, both materially and psychologically, affected our overall
defense posture. The dangerous antimilitary sentiment discouraged defense
spending and unfairly disparaged the men and women who serve in our Armed
Forces.

The challenge that now confronts this country is whether we have the
national will and determination to continue this essential defense effort
over the long term, as it must be continued. We can no longer afford to
oscillate from year to year in so vital a matter; indeed, we have a duty
to look beyond the immediate question of budgets and to examine the nature
of the problem we will face over the next generation.

I am the first recent President able to address long-term, basic issues
without the burden of Vietnam. The war in Indo-china consumed enormous
resources at the very time that the overwhelming strategic superiority
we once enjoyed was disappearing. In past years, as a result of decisions
by the United States, our strategic forces leveled off, yet the Soviet
Union continued a steady, constant buildup of its own forces, committing
a high percentage of its national economic effort to defense.

The United States can never tolerate a shift in strategic balance against
us or even a situation where the American people or our allies believe
the balance is shifting against us. The United States would risk the most
serious political consequences if the world came to believe that our adversaries
have a decisive margin of superiority.

To maintain a strategic balance we must look ahead to the 1980's and
beyond. The sophistication of modern weapons requires that we make decisions
now if we are to ensure our security 10 years from now. Therefore, I have
consistently advocated and strongly urged that we pursue three critical
strategic programs: the Trident missile launching submarine; the B-1 bomber,
with its superior capability to penetrate modern air defenses; and a more
advanced intercontinental ballistic missile that will be better able to
survive nuclear attack and deliver a devastating retaliatory strike.

In an era where the strategic nuclear forces are in rough equilibrium,
the risks of conflict below the nuclear threshold may grow more perilous.
A major, long-term objective, therefore, is to maintain capabilities to
deal with, and thereby deter, conventional challenges and crises, particularly
in Europe.

We cannot rely solely on strategic forces to guarantee our security
or to deter all types of aggression. We must have superior naval and marine
forces to maintain freedom of the seas, strong multipurpose tactical air
forces, and mobile, modern ground forces. Accordingly, I have directed
a long-term effort to improve our worldwide capabilities to deal with regional
crises.

I have submitted a 5-year naval building program indispensable to the
Nation's maritime strategy. Because the security of Europe and the integrity
of NATO remain the cornerstone of American defense policy, I have initiated
a special, long-term program to ensure the capacity of the Alliance to
deter or defeat aggression in Europe.

As I leave office I can report that our national defense is effectively
deterring conflict today. Our Armed Forces are capable of carrying out
the variety of missions assigned to them. Programs are underway which will
assure we can deter war in the years ahead. But I also must warn that it
will require a sustained effort over a period of years to maintain these
capabilities. We must have the wisdom, the stamina, and the courage to
prepare today for the perils of tomorrow, and I believe we will.

As I look to the future--and I assure you I intend to go on doing that
for a good many years--I can say with confidence that the state of the
Union is good, but we must go on making it better and better.

This gathering symbolizes the constitutional foundation which makes
continued progress possible, synchronizing the skills of three independent
branches of Government, reserving fundamental sovereignty to the people
of this great land. It is only as the temporary representatives and servants
of the people that we meet here, we bring no hereditary status or gift
of infallibility, and none follows us from this place.

Like President Washington, like the more fortunate of his successors,
I look forward to the status of private citizen with gladness and gratitude.
To me, being a citizen of the United States of America is the greatest
honor and privilege in this world.

From the opportunities which fate and my fellow citizens have given
me, as a Member of the House, as Vice President and President of the Senate,
and as President of all the people, I have come to understand and place
the highest value on the checks and balances which our founders imposed
on government through the separation of powers among co-equal legislative,
executive, and judicial branches. This often results in difficulty and
delay, as I well know, but it also places supreme authority under God,
beyond any one person, any one branch, any majority great or small, or
any one party. The Constitution is the bedrock of all our freedoms. Guard
and cherish it, keep honor and order in your own house, and the Republic
will endure.

It is not easy to end these remarks. In this Chamber, along with some
of you, I have experienced many, many of the highlights of my life. It
was here that I stood 28 years ago with my freshman colleagues, as Speaker
Sam Rayburn administered the oath. I see some of you now-- Charlie Bennett,
Dick Bolling, Carl Perkins, Pete Rodino, Harley Staggers, Tom Steed, Sid
Yates, Clem Zablocki--and I remember those who have gone to their rest.
It was here we waged many, many a lively battle--won some, lost some, but
always remaining friends. It was here, surrounded by such friends, that
the distinguished Chief Justice swore me in as Vice President on December
6, 1973. It was here I returned 8 months later as your President to ask
not for a honeymoon, but for a good marriage.

I will always treasure those memories and your many, many kindnesses.
I thank you for them all.

My fellow Americans, I once asked you for your prayers, and now I give
you mine: May God guide this wonderful country, its people, and those they
have chosen to lead them. May our third century be illuminated by liberty
and blessed with brotherhood, so that we and all who come after us may
be the humble servants of thy peace. Amen.